If My Business Is Classified as a Partnership, Do We Need Separate Tax IDs?

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A partnership is a single business owned by two or more people. Partners contribute money, property, labor, and skill, and in return share in the profits and losses.

Most businesses, including partnerships, are required to register with the Internal Revenue Service (IRS), as well as with state and local agencies. They must also apply for a partnership tax ID number, also called an Employer Identification Number, or EIN for short.

An EIN is a nine-digit number issued by the IRS, and is used to identify a business and its distinct tax requirements. A partnership is a type of business entity that is required to obtain a tax ID or EIN, and partnerships only need apply for one EIN so long as those partners only own one business together.

How Many Tax IDs Per Business?

An EIN identifies a business, not the individuals that own a business; therefore, only one tax ID is required for a single business. In the case of a partnership, even though there are multiple owners, only one tax ID or EIN is needed.

Partnerships have what’s called pass-through taxation. The business files a separate tax return, but the businesses does not pay income taxes. Instead, the profits and losses pass through to the partners and are claimed on their individual tax returns. Those profits and losses are reported/filed on Schedule 1-K, which breaks down what each partner will report on an individual tax return.

Without an EIN, a partnership could not file the appropriate business tax return, nor would it be able to provide the partners with important information they need for their personal tax returns.

In conclusion, a single EIN is required per business owned by partners. If the partners own multiple businesses, they will need to apply for multiple tax ID numbers: one for each business.

If my business is classified as a partnership, do we need separate tax IDs?

If your business is classified as a partnership, then yes, your partnership requires an EIN, but not two. At tax time, you and your partner would each receive Form 1065 Schedule K-1 to help calculate your self-employment income. If you work for your partner, the business entity is a sole proprietorship with an employee, which also requires a single EIN.

What do I need to obtain a TIN or EIN?

  • Your complete business address
  • The name of the principal officer or owner
  • For an LLC, the number of members
  • The date the business was started or acquired
  • Your type of business and primary operations
  • The number of projected annual employees
  • Phone, fax and email address where you can be reached

How can I get a partnership tax ID EIN?

A partnership ID number is just another name for the nine-digit Employer Identification Number (EIN) required by the IRS for single business tax purposes. There are several ways to obtain an EIN from the IRS:

  1. Fax – You can submit your application to the IRS by faxing your completed SS-4 form. The IRS will fax back your EIN with four business days.
  2. Mail – This is the slowest method. After you find the appropriate address and send in your snail-mail application with the SS-4 form attached, the IRS will mail you back a tax ID number in a week or two.
  3. Online – By far the quickest and most popular way to get your new EIN from the IRS is the online submission. Online applications are safe and secure, and the prompts help you prevent common errors. You can get your EIN within hours when you do it online.

 

 

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